In its Jerusalem Report 2012, a copy of which was seen by AFP, the European Union[3] said Jewish settlement construction posed “the biggest single threat to the two-state solution.”The report described Israel’s settlement construction in east Jerusalem as “systematic, deliberate and provocative” and accused the Jewish state of making deliberate political choices which have threatened to render the two-state solution impossible.Relations between Israel and the EU have been particularly tense in recent months, with Europe voicing increasing discontent over a raft of Israeli plans to build more than 5,000 new settler homes in and around annexed east Jerusalem.[4]The standoff has sparked Israeli concerns the 27-member bloc, its largest import and export market, could move to implement a series of punitive trade sanctions.Authored by EU heads of mission in Jerusalem and Ramallah, the report flagged construction in three southern areas -- Har Homa[5], Gilo and Givat HaMatos -- as being the “most significant and problematic plans.”“The construction of these three settlements is part of a political strategy aiming at making it impossible for Jerusalem to become the capital of two states,” it warned.“If the current pace of settlement activity on Jerusalem’s southern flank persists, an effective buffer between east Jerusalem and Bethlehem may be in place by the end of 2013, thus making the realization of a viable two-state solution inordinately more difficult, if not impossible.”In 2012, tenders were issued for 2,366 new units[6] which were “more than twice” the total number issued over the preceding three years which stood at 1,145, the report said.Most of them were for construction in Har Homa, thereby “significantly expanding the existing footprint of the settlement’s built-up area.”Israel captured east Jerusalem during the 1967 Six Day War[7] and later annexed it in a move never recognized by the international community.It considers all of Jerusalem its “eternal, undivided” capital and does not see construction in the eastern sector as settlement building.But the Palestinians want east Jerusalem for the capital of their promised state, and they -- along with the international community -- consider settlement construction in east Jerusalem and the West Bank as a violation of international law.

'Prevent' funding

The European Union has recommended its 27 member states “prevent” all financial transactions that support Israel's settlement activities in the occupied West Bank, an internal report found on Wednesday. In its Jerusalem Report 2012, the European Union suggested member states “prevent, discourage and raise awareness about problematic implications of financial transactions, including foreign direct investments, from within the EU in support of settlement activities, infrastructure and services.”